DOJ Recovers Up To $48 Million in False Claim Act Case Resulting From Whistleblower Report

In yet another large recovery for the DOJ, on December 6, 2012, DFB Pharmaceuticals, and its subsidiary, Healthpoint Ltd., agreed as part of a settlement to pay up to $48 million to resolve allegations that Healthpoint caused false claims to be submitted to Medicare and Medicaid for an unapproved drug, Xenaderm. This settlement resulted from allegations against Healthpoint in a multi-defendant whistleblower action brought under the qui tam, or whistleblower, provisions of the False Claims Act.

Under the terms of the agreement, Healthpoint Ltd. and DFB will pay $28 million, plus another $20 million if there is a change in ownership of Healthpoint or DFB over the next year.

In January 2011, the DOJ intervened in, and subsequently filed, a civil False Claims Act action against Healthpoint, alleging claiming the company launched Xenaderm, a prescription skin ointment for the treatment of bedsores in nursing home patients, without the required FDA approval. It was also alleged that the company failed to conduct any double-blind placebo controlled clinical studies that established the safety and efficacy of the drug product. The DOJ further alleged that, notwithstanding the lack of FDA approval, the company promoted its drug product as a prescription drug that was reimbursable by Medicaid and would thus cost the nursing homes nothing in order to administer to their Medicaid patients.

The qui tam relator and the DOJ have not yet reached an agreement on the relator’s share of the proceeds of the settlement.

This settlement demonstrates once again the DOJ’s willingness to rely on whistleblowers and the qui tam actions they file to recover large settlements under the False Claims Act.

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